Best Indicators for Technical Analysis

May 2, 2012   ·   0 Comments

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Chapter 1: Technical Analysis

When trading stocks with price action, it is important to confirm your trades with indicators in order to reach the highest win rate possible. However, some indicators can be detrimental to your trading or only a minor positive effect. In this article we will present the best stock trading indicators for chart trading.

 

http://stockssavvy.comThe Relative Strength Index

The relative strength index is a good overbought\oversold oscillator that gives good reversal signals. It generates a buy signal when it crosses the oversold (30) level from below, and a sell signal when it crosses the overbought (70) level from above. Its signals are considered accurate in most timeframes and charts, but to make them extra accurate one can use the Bounce strategy: instead of waiting for price to crosses the level, we wait for it to merely touch it and bounce in the opposite direction. This is a much stronger signal that shows that price has reacted immediately to the signal and therefore it is stronger.
This indicator can be used to confirm various chart patterns and even signals from other indicators such as the Bollinger Bands.

CCI Indicator

The CCI indicator is a very strong indicator that generates good signals on many Forex pairs, stocks and commodities. It shows the average divergence of price from the moving average of last 14 periods, and can give good overbought\oversold signals.
A good signal of the CCI (Commodity Channel Index) is the zero-line-bounce: it is signaled when the CCI comes close to the zero-level, and immediately bounces back in the direction of the previous trend- this is a continuation signal that can perform very well on many charts.

 

Bollinger Bands

The Bollinger Bands is a very useful volatility indicator that can help chart traders make more intelligent decisions. Its power is in the fact that it is able to use volatility to calculate support\resistance signals dynamically. One can use the Bollinger to confirm trades by making sure you take short trades only when price is near the upper band, and take long trades only when price is the lower band.
One can also use the Bollinger Bands to separate between periods of trends and ranges: when the bands are parallel and horizontal it is a sign that trend is weak, and when the bands are trending it shows that price is in a period of trend.

In conclusion, those 3 indicators are highly recommended and can confirm your chart trading signals for maximum accuracy.

Author Bio: Steve Sollheiser is a writer and stock trader fascinated by chart patterns and technical indicators. In his site he shares his insights and thoughts about technical analysis for long-term profits.

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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